Connecting SMEs to New Opportunities
Building Markets
Building Markets A research paper on the Sustainable Marketplace Initiative Jared Bissinger
FOSTERING MYANMAR SUPPLIERS
November 2014
ADB: Asian Development Bank
BM: Building Markets
DICA: Directorate of Investment and Company Administration
FDI: Foreign Direct Investment
FY: Fiscal Year
GDP: Gross Domestic Product
IMF: International Monetary Fund
MEB: Myanma Economic Bank
MIC: Myanmar Investment Commission
NGO: Non-government organization
SME: Small and Medium Enterprise
SMI: Sustainable Marketplace Initiative
TDS: Tender Distribution Service
UN: United Nations
UNOPS: United Nations Office of Project Services
YCDC: Yangon City Development Committee
List of Abbreviations
Section 1.
Section 2.
Section 3.
Section 4. Building Markets
Building Markets
New Opportunities for Myanmar’s Private Sector
4
7
11
20
Building Markets in Myanmar
Building Markets Verified Suppliers
Connecting Suppliers and Buyers
1
Connecting SMEs to New Opportunities
FOSTERING MYANMAR SUPPLIERS
Introduction
Over the last few years, international organizations,
foreign governments, international businesses and
the Myanmar government have increased their
procurement in Myanmar significantly, giving rise to many new
opportunities for local businesses. Sometimes, organizations
procure goods and services through public tenders, on which
any (or at least most) business can bid. However, many Myanmar
businesses are unaware of tenders or lack the experience and
knowledge needed to apply for them. Other times, buyers use
vendor lists or approach potential suppliers directly, however
these can both be time-consuming. Building Markets (BM),
a Canadian NGO, helps buyers to make these connections by
finding local suppliers, training them, and connecting them with
buyers. One of the key aspects of BM’s work is collecting data
on these potential suppliers through in-person verifications, of
which 1,161 have been conducted at the end of June 2014.
This report draws on this data to profile Myanmar’s existing
suppliers for potential local and international buyers. It also uses
data from over 2,200 tenders and nearly 300 specific matchmaking
requests to show which organizations have demand for goods
and services, what types of goods/services are in demand, and
which businesses win these opportunities.
The suppliers verified by BM are often businesses that the
international community wants to and is able to support. They
are overwhelmingly SMEs, and are much more likely than the
average business to have a female owner. They are also more
likely than the average business to have a bank account, a formal
loan, and be registered with the government. BM suppliers are
concentrated in key ‘in-demand’ sectors, which often have
significant competition even in narrow lines of business. About
one in five has a secondary line of business. They are actively
seeking out new business, bidding for over 3,700 tenders in
the last 6 months and winning nearly half of them. Among BM
suppliers, importers tended to bid on and win far more tenders
than local producers. When local producers bid, however, they
Building Markets
Building Markets
2
were just as likely to win as
importers, suggesting that
a major challenge for local
producers is the lack of tenders
for goods/services produced in
Myanmar.
This report explores the
characteristics and experiences
of the businesses that work
with BM. It starts with an
economic overview that
emphasizes the drivers behind
the growth opportunities for
private business in Myanmar.
The second section explores
the work of BM and the data
available for this report. The
third section profiles the
suppliers verified by BM,
including their activities, size
and other attributes such as
financial habits and ownership
characteristics. The last section
explores data on tenders and
other tools for connecting
suppliers to buyers. It looks at
the volume, sources and types
of tenders from the previous
two years, the characteristics
of businesses that bid for and
won tenders, and the types
of opportunities available
through matchmaking and
other services connecting
businesses and buyers.
3
Building Markets
Building Markets
Since Myanmar’s new government came to power in 2011 and
began opening the country to the international community,
private sector businesses have seen a significant increase in
economic opportunities. The economy is growing more quickly
than it has in years, with GDP growth increasing to 8.7% in
2013-14 (see Figure 1). The most recent GDP growth projections
from the International Monetary Fund (IMF) and the Asian
Development Bank (ADB) for FY2014-15 were both over 9%.1
For local businesses, opportunities have come on many fronts.
Domestic businesses are investing more than they have in
decades, with sectors such as construction leading the way.
Domestic investment has increased from an average of just 13%
of GDP in the 1990s and 13.4% of GDP in the 2000s to over 30%
of GDP in 2012.2
Foreign direct investment (FDI) has also increased rapidly. In
the late 1990s and the 2000s, Myanmar attracted few foreign
investors. Most investments during that time were in natural
resource extraction and export-oriented hydropower projects,
from investors in Asian countries including China, Thailand
and Korea.3 Since the new government came to power, FDI has
increased significantly (see Figure 2). The number of investors
receiving approvals from the Myanmar Investment Commission
(MIC) has increased even more rapidly. Five years ago, the MIC
approved only 5 projects. In the most recent fiscal year, FY2013-
14, it approved 123 projects with an estimated value of over $4.1
billion.4 While there are still investments in natural resource and
hydropower projects, most new projects are in manufacturing,
hotels & tourism, and other non-extractive sectors. For example,
in FY2012-13, 78 of the 94 projects approved by the MIC were
in manufacturing, including many garment sector projects.5
Reforms have opened up important new sectors of the economy to
greater private participation, notably in the telecommunications
and oil and gas sectors.
Source: IMF, “Myanmar: 2013 Article IV
Consultation and First Review Under the
Staff-Monitored Program,” August 2013; IMF
“Myanmar: 2014 Article IV Consultation-Staff
Report; Press Release; and Statement by the
Executive Director for Myanmar, October 2014
Source: IMF, “Myanmar: 2013 Article IV
Consultation and First Review Under the
Staff-Monitored Program,” August 2013; IMF
“Myanmar: 2014 Article IV Consultation-Staff
Report; October 2014.
New Opportunities for Myanmar’s Private Sector
Section 1
FIGURE 1. GDP GROWTH
FIGURE 2. FOREIGN DIRECT INVESTMENT
9.1%8.7%
7.3%
5.9%5.1%5.1%
3.6%
5.5%
FY20
07-0
8
FY20
08-0
9
FY20
09-10
FY20
10-11
FY20
11-12
FY20
12-13
FY20
13-14
(est.
)
FY20
14-15
(pro
j.)
FY2008-09
$976
$963
$2,249
$2,057
$2,880
$2,261
FY2009-10
FY2010-11
FY2011-12
FY2012-13(est.)
FY2013-14(proj.)
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
4
The increase in private sector activity has been mirrored by a
similar increase in activity by governments, both foreign and
domestic. Foreign aid has increased, resulting in significant
growth in the work of aid agencies, international organizations
and international non-government organizations (NGOs).
In some cases, bilateral donors have doubled aid or more in a
short time. For example, USAID’s budget for Myanmar increased
from $38.5 million in 2011 to $99.7 million in 2014,6 while the
Australian Government’s Department of Foreign Affairs and
Trade (formerly AusAID) has increased aid from $47 million in
2011-12 to $90 million in 2014-15.7 New diplomatic missions
have opened in Yangon, and there have been increases in staff at
many existing embassies and UN offices.
While the growth in economic activity, investment, and aid
has led to new opportunities for private businesses, reforms
by the Myanmar government have also made it easier for
existing businesses to operate and new businesses to start.
For example, changes in the process to obtain some business
operating licenses have eased entry for new firms. In the hotels
and tourism sector, for example, Nay Pyi Taw issued directives
for local officials to process applications for new travel agencies
within 5 business days of their receipt, helping shorten the time
required for businesses to obtain a license.8 The government
has also reduced the barriers for entry to foreign businesses,
for example by removing minimum capital requirements
and passing the new foreign investment law, the rules and
regulations of which provided much-needed clarity about
sector-specific ownership restrictions.9 The government has
also removed requirements for import and export licenses on
some products and changed banking rules to allow companies
to access funds from telegraphic transfers before exported goods
are shipped (giving businesses de facto access to new sources of
trade credit).10 These reforms have been complemented by the
removal of many international sanctions on Myanmar, which
also eased constraints on businesses.
Lastly, the new government has a renewed emphasis on
developing Myanmar’s private sector, specifically small and
medium enterprises (SME). In January 2013, the Central
Committee for SME Development was formed, chaired by
5
the President and including both vice presidents as well as 20
Ministers.11 The government established the SME Development
Center, under the Ministry of Industry, in 2012. Among its
functions, the SME Development Center facilitates a state-
backed loan program for SMEs in cooperation with the Small
and Medium Industrial Development Bank. The program offers
loans at concessional interest rates of 8.5% per year as opposed
to the commercial rate of 13%. In 2013-14, it issued 10 billion kyat
(US$10m) of loans and plans to issue 20 billion kyat (US$20m) in
2014-15.12 This program is part of a broader and rapid increase
of credit to the private sector, which increased by 58% in 2013
alone, easing another important constraint for businesses.13
Increased economic activity, heightened investment, additional
international donor and government activity and improvements
in the business environment have created many new
opportunities for businesses – chances to find new clients, work
with new suppliers, receive additional government support and
get into new lines of business. However, for many businesses,
especially SMEs that do not have previous experience working
with international clients and suppliers, these opportunities can
be difficult to exploit.
6
Ms. Khin Khin Moe is the owner of Khin Moe Pharmacy, a small
pharmacy in New Bogyoke Market, established in 1999.
In September 2013, she met for the first time with a Building Markets
Business Relationship Officer who conducted an initial face-to-face
interview at her shop. Through the 45 minute questionnaire, a detailed
profile of her pharmacy was developed, assessing the general capacity
of her business and measuring her willingness to work with international
clients.
The BM Matchmaking Team contacted her regularly, every time a
relevant tender or an interesting opportunity was identified. She started
with submiting quotations to a few organizations, and decided to bid for
four tenders. She won her first contract of 700,000 kyats (about US$700)
from ADRA (INGO) to provide various pharmaceuticals and small medical
equipment. A second contract followed for 5,200,000 kyats (US$5,200),
and a third one for over 12,000,000 kyats (US$12,000). She proceeded
to win two more contracts from ADRA and another from CPI and gained
valuable experience venturing into new markets with the support of
Building Markets.
Building Markets
Building MarketsSection 2
Building Markets (BM) works with local suppliers, most of
whom are SMEs, to help them find and exploit new economic
opportunities. This program, called the Sustainable Marketplace
Initiative - Myanmar (SMI-M), has been running in Myanmar
since 2012. The overarching goal is to work with INGOs, UN, and
other international partners to maximize their local impact by
connecting them with local suppliers. This helps local businesses
grow and create jobs, thereby reducing poverty and contributing
to the country’s development. SMI-M does this through finding
local suppliers, connecting them with international buyers, and
training them to meet their demands. SMI-M incorporates a
range of services including:
• Business verification and market research;
• Tender distribution services (TDS) through
www.myanmar-opportunities.org;
• Private sector trainings;
• Scoping of procurement opportunities through
targeted meetings;
• Coordination for Procurement Experts Working Group
for buyers from NGOs;
• Matchmaking reports with business information
provided to buyers;
• A variety of other networking and training events.
As part of the SMI-M, Building Markets collects data on
businesses, tenders, and contracts facilitated. While data
collection is not the primary purpose of BM work, it does provide
useful insights about suppliers in Myanmar when viewed in
context. BM data is demand-driven, coming from matchmaking
and other business information requests from potential
buyers. The result is a group of suppliers from ‘in-demand’
sectors, rather than a representative sample of the population
of Myanmar’s businesses. Once a sector has been selected in
collaboration with a potential buyer or buyers, the BM business
Building Markets in Myanmar
7
verification staff compile comprehensive lists of businesses in
that sector from existing buyer vendors lists (from INGOs/UN),
online directories, the Yangon/Mandalay Directory, directories
of various business associations, and the Myanmar Industries
Directory. The resulting sector-based lists are useful because
they comprehensively cover ‘in-demand’ sectors.
The lists are used to contact businesses and introduce BM and
its services, and make an appointment with an owner or top
manager to complete a verification survey. The survey contains
questions on business characteristics, including size, ownership,
employment & human resources, finance, and the business
environment. It also collects information about the businesses’
experience with tenders. Businesses are occasionally re-verified,
about one time per year. Since 2012, BM has verified 1,161
business in Myanmar, all of which have been located in Yangon.14
While the data is limited in the insights about Myanmar’s private
sector as a whole, its strong coverage of select areas yields sector-
specific insights not available elsewhere.15
8
9
> 10081 - 10061 - 8041 - 6021 - 4011 - 20 0 - 10
12
3 45
67
89
10
11 12 1314
1516
1718
1920
21222324
2526
2728
29
10
LOCATION OF BUILDING MARKETS VERIFIED SUPPLIERS IN YANGON, BY TOWNSHIP
“Building Markets is really practical. We have used the business matchmaking services several times and found it very successful. We have relied on their matchmaking to successfully identify medical equipment suppliers for some of our operations.”
~ U Aung Kyaw Moe, Logistics Manager With Save The Children
“After training we used an appeal letter. First, we lost [the bid for tender] then we submitted an appeal letter and we won. We learned about this appeal letter during the training with Building Markets. We are pursuing more tenders because of Building Markets.”
~ Diana Khin Cho Win,
D.I.S. Trading
1. Mingaladon2. Shwepyitha3. Hlaingtahaya4. Insein5. Mayangon6. Hlaing7. Kamayut8. North Okkalapa9. East Dagon10. North Dagon11. South Okkalapa12. South Dagon13. Dagon Seikkan14. Thingangyun15. Pazundaung16. Botataung17. Bahan18. Kyimyindaing19. Saunchaung20. Dagon21. Ahlone22. Lanmadaw23. Latha24. Pabedan25. Yankin26. Tawme27. Mingala Taungnyunt28. Thaketa29. Dawbon
Building Markets
Building MarketsSection 3
Building Markets Verified suppliers
SeCTOR Of OPeRATIONS
The suppliers verified by Building Markets operate in many
sectors of the economy, though there is a notable concentration
of wholesalers, who made up over 40% of the verified businesses.16
This concentration of businesses is not surprising, given the
lack of breadth and depth in Myanmar’s manufacturing base.
Outside of the manufacturing of food, clothes and a few other
basic goods, many consumer goods and almost all sophisticated
manufactures are imported. Wholesalers were concentrated in
three ‘in-demand’ areas, which were: (1) machinery, equipment
and supplies; (2) construction related materials; and (3) medical
and pharmaceutical goods.17 All other wholesalers are grouped
together in the catch-all category of ‘other wholesale trade.’18
It is important to break out wholesale trading into these ‘in-
demand’ groups, instead of referring to it as a whole, because of
the dominance of these three groups. Referring to all wholesale
traders together could give the impression that the information
is representative of the average wholesale trade business, when
instead it is dominated by the three categories listed above.
Manufacturers made up 21% of the suppliers verified by
BM. The most common type of manufacturer was in the
printing and publishing sector, with 77 businesses.19 The
other businesses were spread out among a wide and relatively
representative range of manufacturing activities, so are grouped
as ‘other manufacturing’.20 Another key in-demand sector was
construction, with 105 verified suppliers.21 The remaining two
categories of ‘in-demand’ suppliers are ‘transportation and
storage’ and ‘vehicle sales and repair,’ which have 87 and 72
verified suppliers respectively.22 Approximately 18% of the
businesses did not fit into any of the above categories, and so
have been classified in the group ‘all other businesses’. However,
the businesses in this group do not necessarily reflect the rest of
the businesses in the economy, so the statistics for this category
should be treated with caution. Using these ten categories gives
the supplier distribution in Figure 3.23
Wholesale
Manufacturing
medical and pharmaceutical goods
printing and publishing
machinery, equipment and supplies
other
construction related materials
Construction
other
Transportation and storageVehicle sales and repair
All other businesses
FIGURE 3. VERIFIED SUPPLIERS, BY SECTOR
207 126117
67
139
77164105
87
72
11
Type of enterprise Number of enterprises
Percentage of formal
enterprises
Percentage of all enterprises
Large enterprises 721 0.6% 0.1%
Small and medium enterprises 126,237 99.4% 16.9%
Total registered enterprises 126,958 100% 17.0%
Informal enterprises 620,000 n/a 83.0%
TABLE 2. DISTRIBUTION OF BUSINESSES BY SIzE AND REGISTRATION24
BUSINeSS SIze
Classifying businesses by size
in Myanmar is challenging,
because there is presently
no universal definitions for
micro, small, medium, and
large enterprises for all sectors.
The one area with a codified
definition is the industrial
sector, which put forth criteria
in the Private Industrial
Enterprise Law (1990). The four
measures were power used,
number of workers, capital
outlay and production value
per year (detailed in Table 1).
According to 2012 data from
the Ministry of Industry’s SME
Development Center, large
enterprises accounted for
11.1% of Myanmar’s industrial
enterprises, while 16.9% were
medium enterprises and 72%
small enterprises. Figures
released by the President’s
Office in early 2013 on the
number and size of private
businesses in Myanmar
indicated a somewhat different
distribution (though the
release was not accompanied
by corresponding definitions).
According to the President’s
Office, just 0.6% of registered
businesses in Myanmar were
large enterprises, with the
remaining 99.4% of registered
businesses being SMEs (see
Table 2). It also indicated just
under 127,000 enterprises
Category Small Medium Large
Power used (in horsepower) 3 to 25 25 to 50 50 +
Number of workers 10 to 50 51 to 100 100 +
Capital outlay (million kyat) 0 to 1 1 to 5 5 +
Production value per year (million kyat) 0 to 2.5 2.5 to 10 10 +
TABLE 1. CLASSIFICATIONS FOR SMALL, MEDIUM AND LARGE INDUSTRIAL ENTERPRISES
Vehicle sales and repair
Vehicle sales and repair
(27)
(33)
(37)
(50)
(51)
(51)
(57)
(67)
(84)
(106)
Printing and publishing
Printing and publishing
Transportation and storage
Transportation and storage
All other businesses
All other businesses
Wholesale of medical and pharmaceutical goods
Wholesale of medical and pharmaceutical goods
Other wholesale trade
Other wholesale trade
Wholesale of machinery, equipment and supplies
Wholesale of machinery, equipment and supplies
Wholesale of construction related materials
Wholesale of construction related materials
Other manufacturing
Other manufacturing
Construction
Construction
0%
0% 10% 20% 30% 40% 50%
20% 40% 60% 80% 100%
FIGURE 4. DISTRIBUTION OF BUSINESSES, BY SIzE AND SECTOR(AVERAGE NUMBER OF EMPLOYEES IN PARENTHESIS)
FIGURE 5. PERCENTAGE OF FULL TIME WORKERS ON DAILY WAGES, BY SECTOR
micro small medium large
12
Source: Organization for Economic Cooperate and Development, Multi-Dimensional Review of Myanmar:
Initial Assessment, p. 114.
Source: Nay Pyi Taw News (2013), U Thein Sein delivers an address at Small and Medium Enterprises
Development Central Committee meeting at Presidential Palace, 14 January 2013. In Organization for
Economic Cooperate and Development, Multi-Dimensional Review of Myanmar: Initial Assessment, p. 104.
were registered, compared with 620,000 informal enterprises
(which, in the statistics below, indicates that the business is either
unregistered or registered with only the municipal government).
The World Bank’s 2014 Investment Climate covered 459 micro,
373 small, 159 medium and 101 large enterprises. However,
this distribution is specified in the survey and therefore not
representative of the actual population of businesses in
Myanmar, of which over 88% are micro or small enterprises.
Compared to these distributions, SMEs were heavily over-
represented in the businesses verified by Building Markets.
They comprised 72% of all the BM businesses, compared to just
14.4% for large businesses. Microenterprises only accounted for
13.6%, which is notable because many businesses in Myanmar
are micro enterprises. However, very few have the capacity and
are in the lines of business where they might engage with BM.
This makes the programs of BM a very effective tool for targeting
SMEs in Myanmar for activities such as capacity building.
There were some significant differences in business size between
the different sectors of economic activity.25 Businesses in the
construction sector had the largest average size, at just over 106
permanent full-time employees. Vehicle sales and repair had the
lowest average number of permanent, full-time employees, at
26. The complete distribution of micro, small, medium and large
enterprises by sector is detailed in the Figure 4, sorted by average
number of employees.
Together, the businesses that work with Building Markets
employ over 86,000 people, nearly 80% of which are full time,
permanent employees. However, 20% of the workers are full time
employees receiving daily wages (part-time employment is not
common in Myanmar). These employees are especially common
in the construction sector, where they make up over 40% of the
workforce of these businesses. In two sectors, vehicles sales and
repair and wholesale of medical and pharmaceutical goods,
daily wage employees comprise less than 10% of the workforce
as noted in Figure 5.
13
SUPPlIeR ChARACTeRISTICS
BM suppliers provided a wide range of information on
characteristics of the business, including the role of women in
ownership and management, registration with the government,
association membership, trade characteristics and finance (see
Table 3). This information provides insights about the scope
and scale of different characteristics and how they vary between
sectors. In some areas, it also allows for comparison with the
‘average’ Myanmar business. By default, BM suppliers are from
sectors in which local and international buyers have expressed
interest in sourcing products locally. They regularly engage with
international clients and suppliers – almost 84% of the businesses
verified by Building Markets reported that they either imported
from overseas suppliers or had clients in another country.
feMAle OwNeRShIP
Nearly half (49%) of the businesses verified by BM had one or
more women as a part or full owner. The percent of businesses
with at least one female owner range from a high of 63% for
wholesalers of pharmaceuticals and medical equipment to a low
of 36% for construction companies. This is significantly more
than the average business in Myanmar, when compared to the
recent World Bank Enterprise Survey. That survey found that
only 27% of businesses in Myanmar had a female among the
owners (Figure 6). The percentage of businesses with a female
owner decreases as business size increases, but the difference is
small and not significant (in the statistical sense). Even among
large businesses, more than 4 in 10 have a woman as the part
or full owner. Female managers are also common. Most of
BM suppliers – over 75% – have one or more female managers
(women in some management role, though not necessarily the
top manager of the business).
ReGISTRATION
Most of the suppliers verified by BM (80%) were registered with the
government as typically required to work with BM. Registration
was most common among wholesalers of machinery, equipment
and supplies, 88% of whom had formalized the business. It was
FIGURE 6. FEMALE AMONG BUSINESS OWNERS, BY SIzE
Micro
Medium
0%
0%
10%
10%
20%
20%
30%
30%
40%
40%
50%
50%
Small
Large
Average business
Building Markets suppliers
14
least common among ‘all other businesses,’ of whom only 70%
were registered. However, Myanmar’s business registration
system is relatively complex, and businesses receive registrations
from a number of government ministries and offices. Company
registrations come from the Directorate of Investment and
Company Administration, a costly and slow process. The World
Bank ranked Myanmar the most difficult country in the world for
these registration, which required 11 procedures, took 72 days,
and cost approximately USD $1,475.26 Some types of company
registrations provide incentives, such as tax holidays or import
duty waivers that motivate certain businesses to obtain DICA
license.27
Among BM suppliers, company registrations were most
common for transportation and storage businesses and
wholesalers of pharmaceuticals and medical equipment. The
time and financial costs of DICA registration is much greater
than municipal registrations, which rarely exceed $80 and take
little time to obtain.28 Businesses in printing and publishing,
other manufacturing, and vehicle sales and repair much more
likely to have municipal registrations than a company license
(for manufacturers, municipal registrations were almost twice as
common).
ASSOCIATION MeMBeRShIP
Association membership is common among BM suppliers
and can signal legitimacy and professionalism, though in
some sectors it is mandatory and associations have significant
quasi-regulatory powers (such as facilitating import license
applications). Among BM suppliers, 63% belong to one or more
associations. In two sectors, transportation and storage and
wholesale of pharmaceutical goods and medical equipment,
80% or more of the businesses are association members, with
most belonging to sector-specific business association (74%
and 61% respectively, compared with an average among all BM
suppliers of just 33%). In other sectors, notably amongst the
other categories of wholesale traders, sector-specific association
membership is not common. Just under one in three businesses
is a member of the Union of Myanmar Federation of Chambers
of Commerce and Industry (UMFCCI), the national chamber
15
FIGURE 7. BUSINESS WITH BANK ACCOUNTS, BY SIzE
Micro
Medium
0%
0%
20%
20%
40%
40%
60%
60%
80%
80%
100%
100%
Small
Large
Average business
Building Markets suppliers
of commerce. UMFCCI membership is most common among
wholesalers of machinery, equipment, and supplies, of whom
60% are members, and least common among printers and
publishers and transportation and storage companies.
IMPORTING
About 53% of BM suppliers imported directly. The sector with
the greatest concentration of direct importers was wholesalers
of machinery, equipment and supplies (82%), followed closely
by wholesalers of pharmaceuticals and medical equipment
(75%) and vehicle sales and repair (71%). At the other end of
the spectrum were transport and storage businesses, of whom
only 19% were direct importers. Businesses were also asked
what percentage of the value of their total sales was imported,
yielding interesting results. Vehicle sales and repair businesses
noted that, on average 98% of the value of their final sales
was imported. Similarly, the three categories of wholesalers
(machinery, construction materials and pharmaceuticals) all
had average import values to final sales of approximately 90%.
Transportation and storage had only 36% of the value of final
sales from import, an unsurprising result given the nature of the
business.
BANKING AND fINANCIAl hABITS
Lastly, businesses were asked about their banking and financial
practices. Here there is often a stronger relationship between
business size and financial practices than there is between
the sector and financial practices. The majority of businesses
in all sectors had bank accounts. The sector with the greatest
proportion of businesses with banking accounts (92%) was
construction, also the sector with the largest business size. The
sector with the smallest proportion was printing and publishing,
a sector with one of the smallest average business sizes. BM
suppliers were far more likely to have bank accounts than the
average business. Micro businesses were more than five times
as likely to bank accounts as the average business, and small
businesses four times as likely (Figure 7).
Only a small percentage of BM suppliers (14%) had a formal
16
loan, which was most common among ‘other manufacturers’
(at 23%).29 The sectors with the smallest share of businesses
receiving formal credit from a financial institution were ‘all
other businesses’ and ‘printing and publishing’, at 5% and 8%
respectively. However, BM suppliers were still almost twice as
likely as the average business to have a loan. While the percentage
of medium and large businesses with loans was almost identical,
the micro and small enterprises which work with BM were far
more likely to have a loan than other businesses of their size
(Figure 8).
Businesses are also asked whether they would be interested in
receiving a bank loan if their business could qualify, to which
58% of the businesses replied affirmatively. This provides further
evidence of the significant unmet demand for credit in Myanmar,
a challenge that was echoed in the World Bank Enterprise Survey,
which found that nearly 30% of businesses identified access
to finance as the major obstacle to doing business. Notably,
demand for loans was slightly higher in sectors needed long-term
investment capital (including construction and manufacturing)
than it was in the wholesale trade sectors, though the differences
were not significant (statistically, at least).
MUlTIPle lINeS Of BUSINeSS AND COMPlex OwNeRShIP
It is not uncommon for businesses verified by Building Markets
to be engaged in a secondary line of business – over 1 in 5 did so.
Of the 1,161 BM suppliers, 234 had a secondary line of business.30
Of these, 123 (or 10.6%) had a secondary activity in the same
sector while 111 (or 9.6%) had a secondary activity in a different
sector.31 There was little overlap between manufacturing
and trading businesses - only 2% of trading businesses had a
manufacturing activity as their second line of business, while
just 1.2% of manufacturers listed wholesale and retail trading
as their secondary activity. Secondary lines of activity were least
common among wholesale and retail traders, with less than
10% having a secondary activity. This lack of diversification was
most noticeable amongst wholesalers of medical equipment and
pharmaceuticals. Of the 126 businesses that reported this as their
primary activity, not one had a second line of business. In other
sectors such as construction and transportation and storage,
FIGURE 8. BUSINESS WHICH HAD A FORMAL LOAN, BY SIzE
Micro
Medium
0%
0%
5%
5%
10%
10%
15%
15%
20%
20%
25%
25%
Small
Large
Average business
Building Markets suppliers
17
secondary lines of business
were much more common.
Unsurprisingly, secondary
activities were also correlated
with business size – only 12%
of micro firms had a secondary
activity, compared with 24% of
large businesses.
It is also not uncommon for
shareholders or owners in a
business to have part or full
ownership of one or more
other businesses. Nearly 40%
of BM suppliers had some
financial link with another
business. The most common
link was owners who also
held an ownership stake in
another business – some 16%
of businesses had owners
who met this criteria. About 1
in 8 businesses (12.4%) were
parent companies, while 9.4%
of businesses were subsidiaries
of larger business. Nearly 60%
of businesses had no financial
link with another business.
Vehicle sales and repair trade; vehicle repair (570)
(15)
(237)
(22)
(80)
(26)
(105)
(87)
Agriculture, Forestry and Fishing
Manufacturing
Professional, Scientific and Technical activities
Administrative and Support service activities
Information and Communication
Construction
Transportation and Storage
0% 20% 40% 60% 80% 100%
FIGURE 9. PERCENTAGE OF BUSINESSES ENGAGED IN SECONDARY ACTIVITY
in the same sector
in a different sector
no secondary activity
Vehicle sales and repair trade; vehicle repair
Agriculture, Forestry and Fishing
Manufacturing
Professional, Scientific and Technical activities
Administrative and Support service activities
Information and Communication
Construction
Transportation and Storage
Yes (parent company)
Yes (subsidiary)
Yes (owners have shares in other businesses)
No
Not sure
(26)
(570)
(237)
87
(105)
(22)
(80)
(15)
0% 20% 40% 60% 80% 100%
FIGURE 10. FINANCIAL LINKS WITH OTHER BUSINESSES
1818
“we got a first contract with UNhCR thanks to Building Markets. This
is a 6-month agreement for Vinyl and Stickers printing. earlier in 2014,
Building Markets called us to check whether we will be interested in
working with a UN agency, and invited us to attend a Pre Bid meeting
for ‘UNhCR’s Printing Services lTA’. we attented, of course! And after
being briefed we prepared our proposal in response the Request for
Proposals (RfP). Before submitting, we double-checked with Building
Markets Bid help Desk that our proposal was eligible and not any major
document went missing. Sometimes, you forget to sign one page, and
our bid can’t be accepted!” Mr. Thet lwin Shwe, Managing Director
Real Life printing company started working with UNHCR on 1st March 2014, and since then has been a regular supplier for UNHCR.
Printing and
Publishing
Construc-tion
Vehicle Sales and
Repair
Wholesale of
machinery, equip-
ment, and supplies
Wholesale of
con-struction related
materials
Wholesale of medical and phar-
maceutical goods
Transpor-tation and
Storage
Other Manufac-
turing
Other wholesale
trade
All other businesses
Gender Has one or more female owners?
55% 36% 49% 46% 46% 63% 40% 47% 54% 49%
Has one or more female managers?
78% 76% 65% 63% 78% 75% 69% 82% 83% 77%
Registration Registered? 87% 83% 82% 88% 81% 85% 78% 81% 81% 70%
… with DICA? 30% 62% 44% 55% 46% 58% 54% 31% 42% 44%
… with Union ministry? 25% 6% 7% 3% 5% 14% 10% 13% 1% 9%
… with the municipal government?
60% 39% 47% 50% 48% 21% 20% 55% 48% 26%
Associations Member of a business association?
46% 72% 57% 73% 57% 80% 84% 48% 61% 58%
Member of RUMFCCI? 14% 38% 50% 60% 43% 20% 16% 25% 38% 26%
Member of a sectoral association?
30% 33% 8% 13% 12% 61% 74% 26% 26% 35%
Trade Import directly? 29% 39% 71% 82% 67% 75% 19% 41% 63% 44%
What % of the value of total sales is im-ported?
80% 73% 98% 90% 89% 92% 36% 63% 85% 83%
Had an international client?
81% 63% 49% 69% 58% 45% 80% 67% 67% 78%
Finance Bank account? 72% 92% 79% 89% 89% 86% 87% 79% 83% 86%
…in the name of the business?
24% 56% 55% 58% 41% 58% 56% 32% 44% 49%
Received a formal loan?
8% 17% 12% 12% 15% 17% 10% 23% 20% 5%
Want a formal loan? 61% 66% 55% 61% 49% 61% 55% 63% 56% 53%
TABLE 3. CHARACTERISTICS OF BUSINESSES IN KEY SECTORS
19
Building Markets
Building Markets
Connecting Suppliers and Buyers
Section 4
Matchmaking requests, inquiries for business information and
available tenders are the key factors that determine the suppliers
that BM verifies. As the previous section shows, sectors such as
construction, pharmaceuticals, transportation, and printing
and publishing were regularly sought after – they were the ‘in-
demand’ sectors. However, information on this demand is also
very valuable, and has also been tracked by BM. Since 2012, BM
has recorded, categorized, and disseminated over 2,200 tenders.
They have also facilitated 286 requests for business information,
such as matchmaking requests or assistance with vendor lists.
Together, these activities have helped 61 unique businesses win a
total of 135 contracts. This section explores these different types
of solicitations, including the organizations that are requesting
information and issuing tenders and the goods and services they
hope to procure.32 It also looks at some basic characteristics of
businesses that tend to bid for and win tenders, and provides
some details about the contracts awarded to businesses that
engaged with BM.
TeNDeRS ISSUeD
While there has been an influx of foreign governments,
international organizations and multinational companies to
Myanmar in recent years, the vast majority of tenders tracked and
disseminated by Building Markets (94%) came from the Myanmar
government (Table 4).33 These tenders were issued by 40 different
ministries, SOEs, and other government organizations (with
7.5% from unspecified parts of the Union government). Most of
the remaining tenders came from international organizations,
notably the UN and international NGOs. The international
organization with the largest number of tenders was UNOPS,
which issued 33 tenders in the last two years. Less than one
percent came from private businesses or directly from foreign
governments and their aid programs.
TABLE 4. SOURCE & NUMBER OF TENDERS
Type of organization
Number of orga-
nizations
Number of tenders
Per-cent-
age of tenders
Myanmar government
40 2,090 94%
International Organizations
8 48 2%
NGO 14 40 2%
Private Busi-nesses
10 17 1%
Foreign Govern-ment/Donor
6 12 1%
Other 4 10 0%
20
Within the Myanmar government, tenders are distributed across
a wide range of ministries, though the data does show some
emphasis on ministries that focus on infrastructure and industry.
The Ministry of Construction issued the most tenders in the last
two years (300), followed by the Ministry of Health (233) and the
Ministry of Electric Power (209). In all, 6 ministries issued more
than 100 tenders and another 7 issued between 50 and 100. The
total number and distribution of tenders is detailed in Figure 11.
Tenders were distributed across a wide range of sectors, however
there was a noticeable concentration in construction. If all
tenders related to construction (including the construction of
buildings, supply of construction materials, provision or
operation of construction equipment, construction services
(such as installation, painting, etc.), and other construction
activities) are grouped, they comprised 53.5% of all tenders from
the last two years (1,188 in total). These tenders were issued by a
wide range of ministries (for example, by the Ministry of Health,
to build hospitals), not only the Ministry of Construction. There
were 221 tenders for automotive products and services, 10% of
the total, and 189 medical-related tenders, another 8.5% of the
total (Figure 12). It was common for tenders to solicit goods from
more than one sector. Just over 26% of tenders (585) asked for
bids to supply more than one type of good or service.
BM verified suppliers regularly bid for the tenders that are
tracked and distributed by BM, as well as others that are not. In
the six months before being verified, these businesses submitted
over 3,700 tender bids and won 1,766 of them. The experiences
of these businesses provide some tentative insights into the
businesses that bid for and win tenders. The metric that is
most closely associated with the number of tenders a business
wins is, unsurprisingly, the number of tenders on which it
bids. Interestingly, the number of bids varies by sector quite
dramatically. Wholesalers of medical and pharmaceutical goods
were, by far, the most regular bidders, averaging 7.77 bids and
4.44 wins over the last six months. Construction businesses also
bid often, an average of 4.77 times, winning an average of 1.85
of those tenders. Manufacturing businesses (other than printing
and publishing) bid an average of only 0.89 times over the last
six months, winning just 0.33 times (Figure 13). Success rates
Ministry of Construction
Ministry of Industry
Ministry of Health
Ministry of Science and Technology
Ministry of Electric Power
Ministry of Rail Transportation
Republic of Union of Myanmar (unspecified)
Ministry of InformationMinistry of EnergyMinistry of Agriculture and IrrigationOther
FIGURE 11. TOP SOURCES OF GOVERNMENT TENDERS
FIGURE 12. TENDERS, BY GOOD/SERVICE
300
444
233
209
350
166
174
116
137
113
83
110
136
72
134
580
10674 181
73
7578
94
114
96
85
46
Construction
Automotive
Medical
Manufacturing
building construction and renovation
sales and rental
pharmaceuticals
materials
parts, suppliers and other
equipment and other
machinery (generators, A/C, etc.)
Furniture
other constructionconstruction services
Printing and publishing
IT (services and equipment)ServicesTransportationOther
21
varied between the different
sectors, from a low of 37% by
‘other manufacturers’ to a
high of 67% for wholesalers of
construction related materials,
though these differences were
not statistically significant. The
most cited reasons for losing a
tender was that the bid ‘was
not competitive (52%) or the
buyer was corrupt (15%). One
in eight businesses did not
know the reason for their loss.
The lack of tender bids and
wins by manufacturers is
notable, especially because
manufacturers tend to create
jobs and add value locally, a
key objective of BM. However,
Myanmar’s manufacturing
sector is poorly position to meet
the demand of tenders from
government, business, and
the international community.
One reason behind this lack
of participation is that most
domestic manufacturers make
products for which there are
few tenders. Of the 43,232
manufacturing businesses
registered with the Ministry
of Industry in Myanmar in
2013, 63% were in the food and
beverage sector (Table 5).34
However, there were only 8
tenders for food and beverages
over the last two years, out of
a total of 2,217 tenders tracked
by Building Markets. The
second largest subsector in
FIGURE 13. NUMBER OF TENDER BIDS AND WINS, BY SECTOR
Vehicle sales and repair
Printing and publishing
Transportation and storage
All other businesses
Wholesale of medical and pharmaceutical goods
Other wholesale trade
Wholesale of machinery, equipment and supplies
Wholesale of construction related materials
Other manufacturing
Construction
0 2 4 6 8
Tender wins
Tender bids
Food and beverage 27,455
Construction Materials 3,277
Clothing and wearing apparel 1,722
Metal and mineral 1,900
Personal goods 1,115
TABLE 5. NUMBER OF REGISTERED MANUFACTURING BUSINESSES, BY SECTOR
FIGURE 14. NUMBER OF TENDER BIDS, WINS AND SUCCESS RATE, BY SIzE
Source: SME Development Centre, Powerpoint
Presentation, August 2013.
Micro
0 0%
1 10%
2 20%
3 30%
4 40%
6 60%
5 50%
7 70%
Small Medium Large
Average number of wins
Average number of bids
Num
ber
of b
ids/
win
s
22
Myanmar’s manufacturing base was producers of construction
materials, which number 3,277 businesses. While there were 333
tenders for construction materials over the same time period,
there were still 10 times as many businesses as available tenders.
Besides the low number of tenders, manufacturers also struggle
to bid for complex tenders which include multiple goods and
services. This can disadvantage manufacturers who specialize in
producing only one good, who do not bid because they cannot
supply the other goods and/or services requested in the tender.
Business size is also closely linked with the number of tenders
that business bid on and win (Figure 14). This link is statistically
significant, but unsurprising and almost tautological because
larger businesses with more employees almost always have
more customers and higher sales. The smallest businesses,
microenterprises, bid on an average of less than one tender in
the last six months, winning less than 0.4 times. Large businesses
bid on an average of 6.35 tenders, or about one a month, winning
an average of 2.75 times. While the number of bids and wins
was related with business size, the success rate of businesses
winning tenders was not. Micro and small businesses actually
won a higher percentage of their tender bids than medium or
large businesses.
Besides business size and sector of operation, there are a number
of other characteristics that are related to the number of tenders
for which businesses bid. First, there was a strong link between
the number of bids and the percentage of import value in final
sales (Figure 15). Businesses whose imports comprised 80% or
more of total sales bid on more tenders (two and a half times
more) than businesses whose imports comprised 20% or less of
total sales. Simply put, businesses that add less value locally tend
to bid for more tenders. Membership in business associations
and the presence of a bank account were also significantly related
to higher numbers of tender bids. Other characteristics, such as
business age, female ownership, family business, and financial
links to other businesses, did not have a significant effect on the
number of tender bids.35
Many of these same characteristics were also significantly related
to the number of tenders that a business wins (unsurprising
23
FIGURE 15. NUMBER OF TENDER BIDS, WINS, AND SUCCESS RATE, BY IMPORT QUINTILE
Micro
0 0%
1 10%
2 20%
3 30%
4 40%
6 60%
5 50%
7 70%
Small Medium Large
Average number of winsAverage number of bidsN
umbe
r of
bid
s/w
ins
Succ
ess
rate
given the close link between
bids and wins). The percentage
of import value, business
association membership and
bank accounts were all related
to the number of tender
wins. However, the age of
the business and whether or
not it was a family business
also had an impact on the
number of tender wins. Older
businesses tended to win more
tenders than newcomers,
and family businesses tended
to win fewer than non-
family businesses.36 Female
ownership and financial links
to other businesses were not
significant.
This analysis raises an
important question: are
importers winning the bulk
of tenders in Myanmar,
to the detriment of local
manufacturers and service
providers? While it is true that
importers bid for and win
more tenders, they do not win
a higher percentage of tenders.
In fact, their success rates are
almost identical to businesses
who import very little. So,
businesses that add more
value locally tend to win fewer
tenders because they bid on
fewer tenders, and they bid on
fewer tenders because there are
fewer tenders for those goods
and services. This may suggest
a segmented market with little
Type of organization Number of organizations
Number of requests
Percentage of requests
Myanmar government 0 0 0%
International Organizations 5 59 21%
NGO 30 219 77%
Private Businesses 2 2 1%
Foreign Government/Donor 2 3 1%
Other 1 3 1%
TABLE 6. MATCHMAKING AND BUSINESS INFORMATION REQUESTS
home essentials
automotive
services
transportation
medical equipment; pharmaceuticals
IT (services and equipment)
construction
printing and publishingother
FIGURE 16. MATCHMAKING BY GOOD/SERVICE
16 48
45
3635
27
26
25
27
24
direct competition between importers and local producers,
with importers competing against other importers while local
producers tend to compete against other local producers.
MATChMAKING, VeNDOR lISTS AND OTheR INfORMATION ReqUeSTS
While tenders are an important source of business opportunities
and a focus of BM, they are complemented by other services,
such as matchmaking, vendor list assistance and the distribution
of other business information. These services all help link local
suppliers to new clients. Matchmaking services are more hands-
on and tailored. Potential buyers discuss their needs with BM,
which contacts businesses, verifies information, and provides
that to the buyer. While the vast majority of tenders were from the
Myanmar government, the bulk of matchmaking and business
information requests came from NGOs (see Table 6). Over the
last two years, BM has facilitated 119 matchmaking requests,
119 requests for vendor list assistance, and 48 other requests for
business information from a total of 40 unique organizations.
For these matchmaking and information requests, BM made
1,685 contacts with 632 unique suppliers. The top supplier was
contacted for 46 different business opportunities. For each
opportunity, an average of 6 prospective suppliers were contacted.
A total of 169 buyers received information on businesses, with
the average buyer receiving details on 6 different suppliers.
While tenders were dominated by solicitations in the construction
sector, matchmaking and business information requests were
more evenly distributed among a number of different sectors.
There were far fewer requests for suppliers in the construction
sector, and much greater demand for ‘home essentials’ (such as
household appliances, furniture, accessories and other supplies).
25
CONTRACTS
While providing suppliers with tender information and giving
buyers details about Myanmar’s local businesses is important,
the best measure of success is the contracts that come out of
connecting buyers and suppliers. BM facilitated 135 (verified)
contracts through one of their services, with 75 coming as a
result of matchmaking activities.37 The total combined value of
contracts coming from matchmaking was nearly $1.4 million,
while the median value was $5,133. The 75 contracts were won by
37 unique businesses, 21 of which had never received a contract
from that organization before. For a few of the businesses, it was
their first contract with an international buyer. Twenty businesses
won a total of 38 verified contracts using the tender distribution
services, and these contracts tended to be larger in value. Their
total combined value was $2.19 million, with a median value of
$19,000. The remaining businesses that won contracts attended
one or more training conducted by BM.
Though tenders were heavily focused on construction and
matchmaking requests distributed across a range of sectors, the
sector with the most contracts awarded was ‘medical equipment;
pharmaceuticals.’ This sector had almost 40% of the contracts
verified by BM. ‘Home Essentials’ was also dominant, with 29%
of the verified contracts (39 contracts in total). The construction
industry, which dominated the number of tenders, resulted in
only 3 verified contracts for BM suppliers, though this may be a
result of verification challenges and not reflect the true number
of contracts.
26
Grand fortuna Co ltd (formally known as TPl logistics ) specializes in
logistics. Mr. Myint wai, the Managing Director, is a busy man. with the
support of Building Markets, he got new clients: Community Partner
International (CPI), Myanmar Red Cross Society (MRCS), and Action
Contre la faim. he was also listed as a vendor by International Crescent
and Red Cross (ICRC). he not only secured contracts but developed long-
lasting business relationships with those buyers. A long-term agreement
was signed with UNhCR for one year, covering transport services. In mid
2014, he signed a long-term contract with CPI (an average of 500$/
month) and 4 contracts with MRCS ($20,000). from the network offered
by Building Markets, he also found new Myanmar clients and provided
them with services valued at approximately $10,000.
The suppliers verified by BM represent only a fraction of the
local businesses in Myanmar that could become suppliers to
international organizations, governments, and businesses,
as well as the Myanmar government and other local private
companies. BM suppliers span 50 different lines of work, and
in some ‘in-demand’ sectors, potential suppliers number in
the hundreds. Gathering information on these businesses can
be both challenging and time-consuming, however BM helps
lower these transaction costs by serving as an information hub,
disseminating that knowledge to many buyers. By lowering
the burden of working with local suppliers, organizations,
governments, and businesses can maximize the benefit of their
procurement dollars, helping create more business and more
jobs in Myanmar. There is much that can be done to improve the
local impact of all of these new opportunities.
Recommendations for enhancing the local benefit of these
opportunities include:
fOR INTeRNATIONAl ORGANIzATIONS, NGOS, AND fOReIGN
GOVeRNMeNTS:
• Examine procurement practices to determine if and how to
expand tenders in areas with significant local value added. Among
the ‘in-demand’ sectors for BM, manufacturing, transportation
and storage, printing and publishing and construction have the
most local value added and should be target sectors for additional
procurement.
• Unbundle tenders that solicit multiple goods and services,
especially when one or more of those goods/services are in
sectors where domestic manufacturers have capacity.
• Provide additional feedback (including on the competitiveness
of the bid) on tender bids to increase competitiveness and
Building Markets
Building MarketsSection 5
Recommendations
27
28
decrease the number of businesses that were not aware of the
reason they lost a tender.
• When possible, work with counterpart ministries in government
to expand the number of tenders offered in sectors with local
value added and unbundle complex tenders.
fOR fOReIGN PRIVATe BUSINeSS:
• Become more heavily involved in tendering and matchmaking
to maximize the local impact of activity in Myanmar.
•Work with local subcontractors who handle procurement to
increase local sourcing.
fOR MyANMAR GOVeRNMeNT:
• Examine procurement practices to determine if and how to
expand tenders in areas with significant local value added (as
noted above).
• Unbundle tenders that solicit multiple goods and services.
29
Notes
1. Asian Development Bank, “Myanmar: Unlocking the Potential: Country Diagnostic Study,” Manila, Philippines, August 2014, p. 2; and International Monetary Fund, “Myanmar: Staff Report for the 2014 Article IV Consultation,” Washington, DC, October 2014, p. 20.
2. ADB, p.2.
3. Bissinger, Jared, “Foreign Investment in Myanmar: A Resource Boom but a Development Bust?” Contemporary Southeast Asia Vol. 34, No. 1 (2012), p. 23-52.
4. Central Statistical Organization in Bissinger, Jared (2014), Foreign Investment in Myanmar Since 1989 – Dataset, Accessed Oct. 30, 2014. Available at: http://www.academia.edu/
5. Central Statistical Organization in Bissinger, Jared (2014).
6. Foreign Assistance, “Burma,” Accessed Oct. 7, 2014. Available at: www.foreignassistance.gov
7. Foreign Assistance, 2014.
8. Bissinger, Jared and Linn Maung Maung, “Subnational Governments and Business in Myanmar,” Myanmar Development Resource Institute – Center for Economic and Social Development and The Asia Foundation, February 2014, p. 19
9. Government of the Republic of the Union of Myanmar, “Notification Order No. 11/2013,” Ministry of National Planning and Economic Development, Nay Pyi Taw, Myanmar, Jan. 13, 2013; and Republic of the Union of Myanmar, “Notification Order No. 1/2013,” Myanmar Investment Commission, Jan. 31, 2013.
10. Bissinger, Jared, Interview with
Trader, Yangon, Myanmar, 2014.
11. ADB 2014, p. 183
12. May Soe San, “Fulfilling Myanmar SMEs’ Urgent Financing Needs,” Myanmar Business Today, Sept. 24, 2014, available at: http://www.mmbiztoday.com/articles/fulfilling-myanmar-smes-urgent-financing-needs
13. IMF, 2014, p. 3. Note that the figure runs from February 2013 to February 2014.
14. While existing verification has been limited to Yangon, BM is in the process of expanding its reach to Mandalay and Mawlamyine.
15. It is important to note that there is self-selection bias in the data, as only business that choose to participate and complete a BM verification survey will be represented in the analysis. However, this bias is common to all surveys and does not skew the results of this analysis in any way different to that of any other business survey.
16. In order to give structure to the verified businesses, this report uses the International Standard Industrial Classifications (ISIC), a widely-used set of classifications for productive activities produced by the United Nations Department of Economic and Social Affairs. ISIC has four levels of specificity for economic activity (listed from order from general to specific), which are: Section (e.g. Section A: Agriculture, Forestry and Fishing); Division (eg. Division 01: Crop and animal production, hunting and related service activities); Group (e.g. Group 011: Growing of non-perennial crops); and Class (eg. Class 0111: Growing of cereals (except rice), leguminous crops and oil seeds).
17. Only one business verified by Building Markets was classified as a manufacturer of pharmaceuticals,
30
medicinal chemical and botanical products (ISIC Division 21). This business is not included in the category of wholesale of medical and pharmaceutical goods. Wholesale of machinery, equipment and supplies corresponds to ISIC 4650-4659, wholesale of construction related materials to ISIC 4663, and wholesale of medical and pharmaceutical goods to ISIC 4690.
18. This category corresponds to all other businesses falling in ISIC Division 46 that do not come under one of the three specific wholesale groups listed above.
19. Printing and publishing, as defined for this report, would include ISIC 18 and ISIC 58, which both contain publishing-related activities that were not differentiated in the BM data collection. We include these under manufacturing because the vast majority of suppliers verified by BM were classified primarily under ISIC 18.
20. Including ISIC Divisions 10-17 and 19-33.
21. Note that this sector includes ISIC Divisions 41 to 43, but not the import or wholesale of construction materials, which is listed separately above.
22. Transportation and storage businesses are defined as ISIC Divisions 49 to 53, though the category was comprised almost entirely of land transportation (ISIC 49) and water transportation businesses (ISIC 50). Vehicle Sales and Repair businesses are defined as coming from ISIC 45.
23. This distribution of businesses undoubtedly varies from that of the country’s entire private sector, because it is driven by demands of potential buyers. However, making a more accurate comparison is limited by data shortcomings. The best business survey to date, the
31
World Bank’s 2014 Investment Climate Assessment, surveyed 1092 registered firms, however the survey design specified the sectoral distribution of businesses. This prohibits using the data to make inferences about the distribution of businesses across the country. Another common source of data on the sectoral distribution of businesses is government data on business licenses, however this is disparate in Myanmar and not sufficient for analysis purposes. See World Bank, “Myanmar Investment Climate Assessment: Enterprise Survey Preliminary Results,” Powerpoint presentation, Nataliya Mylenko, June 30, 2014.
24. Note that Ministry lists tend to overstate the number of enterprises because the statistics only track enterprises that have registered at some point, not enterprises that are currently in operation. Enterprises that have closed would still show up on Ministry lists.
25. Note that throughout this report, ‘business size’ is used in reference only to the number of full-time, permanent employees.
26. World Bank, “Doing Business 2014: Understanding Regulations for Small and Medium-Size Enterprise,” Washington, DC, 2013, p. 212.
27. Company registrations with the Directorate of Investment and Company Administration at the Ministry of National Planning and Economic Development are available online: http://dica.x-aas.net/dica/. Registrations from most other Union-level ministries and municipal offices are not.
28. Bissinger and Linn Maung Maung 2014, p. 20.
29. Loans are from formal financial institutions, but not necessarily what is referred to as a ‘commercial loan’ in Myanmar, which carries a 13%
interest rate and one year term. Other special loan products are available for select businesses. This comparison includes all loans from formal financial institutions.
30. For the comparison of primary and secondary lines of business, we revert to using ISIC-based sector codes for economic activity. The classifications employed thus far in the paper were specific to the businesses verified by Building Markets, but different categories had different levels of specificity. When using these BM-specific categories, results were heavily dependent on the way businesses were classified. Using a more standard, ISIC based sector classification ensures more accurate sector-to-sector comparisons.
31. In the calculations, ‘sectors’ are defined using the ISIC Sections A-U, as defined in the International Standard Industrial Classifications of All Economic Activities (ISIC), Rev. 4. Businesses with secondary activities ‘within the same sector’ were those whose activities fell within the same ISIC section, while those ‘in a different sector’ did not.
32. Analysis of the goods and services requested in tenders, matchmaking requests, and other requests for information presents a number of challenges. First, tenders often request many different types of goods and/or services. These regularly span different categories, regardless of whether ISIC codes or BM sectors are used. Second, classifying tenders by the primary good/service solicited is challenging because it is not possible to distinguish which component of the tender is the most financially significant. It is not possible to classify tenders using the ISIC system because buyers can purchase goods from businesses in manufacturing, wholesaling or retailing. For example, a tender soliciting pharmaceuticals does not specify whether the good must be
bought directly from a manufacturer, through a wholesaler, or from a retail, nor whether that good must be produced locally or imported. As such, tenders are presented according to the classification assigned to them by Building Markets.
33. Tenders were tracked by Building Markets, starting from November 2012 through October 2014.
34. Data from Ministry of Industry, Data on the distribution of manufacturing businesses registered with municipal offices was not available.
35. The seven characteristics, as well as business size and sector, were regressed against number of bids. While the set of characteristics above (including the sector of activities and the number of employees) was statistically significant in its relationship with the number of tenders for which a business bid, it had only limited explanatory power – less than 9% of the total variation in the number of bids. So while these characteristics are linked with the number of tender bids, it is important to note that there are also many other important factors that aren’t included in the above list and which were not included in the BM data set.
36. Again, though, all the business characteristics only had limited explanatory power in the number of tender wins – about 8%.
37. Of course, BM is more heavily engaged in the matchmaking activities, which makes them much easier to verify than tenders won by businesses who found the opportunities on myanmar-opportunities.org.
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